TaxTMI Updates e-Newsletter
Nov 11,2022

Cancellation of GST registration for continuous non-filing of returns - revival of registration on filing returns and payment of tax, interest, fine and fee - restriction on utilisation of Input Tax Credit pending scrutiny - prohibition on adjustment of tax liability from unutilised Input Tax Credit - exercise of writ jurisdiction to grant conditional relief pending compliance - cancellation under Section 29 of the Central Goods and Services Tax Act, 2017

Cancellation of GST registration for continuous non-filing of returns - revival of registration on filing returns and payment of tax, interest, fine and fee - restriction on utilisation of Input Tax Credit pending scrutiny - prohibition on adjustment of tax liability from unutilised Input Tax Credit - exercise of writ jurisdiction to grant conditional relief pending compliance - Whether the petition challenging cancellation of GST registration for non-filing of returns could be allowed and registration revived subject to conditions similar to those in Suguna Cutpiece Centre's case - HELD THAT: - The Court, noting its consistent earlier decisions in Suguna Cutpiece Centre's case and subsequent similar rulings, accepted that the petitioner's registration, cancelled with effect from 24.01.2022 under Section 29 of the CGST Act for continuous non-filing of monthly returns, would be dealt with by extending the same conditional relief. The relief granted is conditional and procedural: the petitioner must file the outstanding returns for the period prior to cancellation (if not already filed), pay the tax due together with interest, and pay the fine/fee for belated filing within the period specified in the earlier order; any payment must be in cash and not adjusted against unutilised Input Tax Credit; any Input Tax Credit already claimed must be subject to scrutiny and approval by the competent officer before utilisation; respondents may impose restrictions to prevent misuse such as bill trading; on compliance with these conditions the registration shall be revived. The Court applied its supervisory writ jurisdiction to extend the established equitable procedural remedy to the petitioner without adjudicating the substantive correctness of the cancellation beyond directing compliance with the stipulated conditions. [Paras 4, 5, 6]

Writ petition allowed on the terms laid down in paragraph 229 of Suguna Cutpiece Centre's order; registration to stand revived upon compliance with the specified conditions; no costs.

Final Conclusion: The High Court allowed the petition challenging cancellation of GST registration and directed revival of registration on compliance with the conditional package of filing outstanding returns, payment of tax with interest and prescribed fines/fees, and subjecting Input Tax Credit to scrutiny and restrictions as directed in Suguna Cutpiece Centre's case; no costs.

Input Tax Credit - refund of accumulated ITC on exports - nil-rated exports - bona fide mistake in refund claim classification - rejection of refund for incorrect ground selection - verification of quantum on date of refund application

Input Tax Credit - refund of accumulated ITC on exports - nil-rated exports - bona fide mistake in refund claim classification - rejection of refund for incorrect ground selection - Entitlement to refund of accumulated ITC on exports despite inadvertent selection of an incorrect ground in the refund application. - HELD THAT: - The petitioner, a sole proprietor engaged in export of eggs, was entitled to Input Tax Credit because the exported commodity is nil-rated, and the respondent did not dispute entitlement to refund. The refund application incorrectly selected a residuary ground due to constraint arising from the earlier GSTR-3B return which had been filed indicating export with payment, a mistake described as bona fide by the petitioner. The officer rejected the claim solely on the ground that the petitioner had invoked the residuary category instead of the appropriate export category. The High Court held that rejecting the refund solely on account of this inadvertent classification error, where entitlement is otherwise established and not contested by the revenue, would be inappropriate. The officer's conclusion on this sole ground was therefore set aside and the impugned order quashed.

Impugned rejection set aside; petitioner entitled to refund and the rejection based solely on the inadvertent choice of the residuary ground is quashed.

Verification of quantum on date of refund application - Electronic Credit Ledger - refund of accumulated ITC on exports - Direction to verify the correct quantum of ITC refundable and to issue the refund within a specified time-frame. - HELD THAT: - There was a dispute as to the quantum of Input Tax Credit-ECL balance as at 31.03.2018 differed from the figure asserted to be available on filing the return in May 2018 and thereafter on the date of the refund application. The officer's order indicates that the officer accepted the petitioner's explanation regarding quantum, albeit not explicitly. The Court declined to adjudicate the exact computation itself and instead directed the officer to satisfy himself as to the correct quantum as on the date of the refund application and thereafter to grant the refund. The direction is administrative and confined to verification of quantum and issuance of refund.

Officer to satisfy himself regarding the correct quantum of refund as on the date of the refund application and to issue the refund within eight weeks from the date of the order.

Final Conclusion: The petition is allowed: the order rejecting the refund claim is set aside because the rejection rested solely on an inadvertent misclassification in the refund application despite undisputed entitlement; the assessing officer is directed to verify the correct quantum as on the date of the refund application and to grant the refund within eight weeks.

Interest on delayed payment of tax - electronic cash ledger - discharge of tax liability upon filing of GSTR-3B - proviso to Section 50 - levy on net cash liability debited from electronic cash ledger - date of credit to Government account deemed date of deposit in electronic cash ledger - late fee for delayed furnishing of return

Discharge of tax liability upon filing of GSTR-3B - electronic cash ledger - date of credit to Government account deemed date of deposit in electronic cash ledger - Whether deposit in the Electronic Cash Ledger prior to filing of GSTR-3B constitutes discharge of the tax liability for the relevant tax period. - HELD THAT: - A combined reading of Section 39(7), Section 49 and Rule 87 shows that amounts deposited into the Electronic Cash Ledger are deposits available for use but are not appropriated to Government accounts as payment of tax until they are debited on filing of the return. Rule 87(6)-(7) describe generation of challan and credit to the Electronic Cash Ledger upon receipt of Challan Identification Number, and Section 49(3)-(4) and the Explanation clarify ledger operation. Section 39(7) prescribes that tax due shall be paid not later than the last date for furnishing the return and Rule 61(2) contemplates discharge by debiting the Electronic Cash or Credit Ledger when filing GSTR-3B. Accordingly, mere deposit in the Electronic Cash Ledger before filing the return does not amount to discharge of the tax liability; debit on filing effects the payment for the tax period. [Paras 13, 14, 15]

Deposit in the Electronic Cash Ledger prior to filing of GSTR-3B does not discharge the tax liability; tax is discharged when the Electronic Cash Ledger is debited upon filing the return.

Interest on delayed payment of tax - proviso to Section 50 - levy on net cash liability debited from electronic cash ledger - late fee for delayed furnishing of return - Whether interest under Section 50 can be levied where tax amounts were deposited in the Electronic Cash Ledger prior to the due date but the GSTR-3B was filed late. - HELD THAT: - Section 50(1) requires payment of interest for the period the tax remains unpaid. The proviso to Section 50, read with Sections 39(7) and 49 and Rule 87, establishes that interest is attracted on the portion of tax that is paid by debiting the Electronic Cash Ledger when the return is furnished after the due date. Since debit to the Government coffers occurs on filing of the return, amounts lying in the Electronic Cash Ledger but debited only upon belated filing render the taxpayer liable to interest for the period of delay. The proviso limiting interest to net cash liability is consistent with, and does not negate, the rule that payment (debit) occurs on filing; it avoids double-charging where ITC is involved but does not convert ledger deposits into deemed payment prior to filing. [Paras 15, 16]

Interest under Section 50 is leviable on the tax amount debited from the Electronic Cash Ledger upon belated filing of GSTR-3B; therefore interest can be computed even though deposits were earlier reflected in the Electronic Cash Ledger.

Interest on delayed payment of tax - refund claim - Whether the petitioner is entitled to refund of interest collected where the petitioner has already paid the interest determined to be due. - HELD THAT: - The court found that the petitioner had its returns filed after the due date for certain months and the Revenue correctly computed interest on delayed payment in accordance with the statutory scheme. The petitioner had subsequently discharged the interest liability by payment (DRC-03). Having paid the determined interest, no case for refund arises. [Paras 16, 17]

No refund is payable where the petitioner has paid the interest liability determined to be due; the claim for refund is dismissed.

Final Conclusion: The writ petition is dismissed. The Court holds that deposits in the Electronic Cash Ledger before filing of GSTR-3B do not discharge tax liability; tax is discharged when the ledger is debited on filing the return and interest under Section 50 is leviable on the net cash tax debited upon belated filing. As the petitioner paid the determined interest, no refund is payable.

Availability of input tax credit on CSR expenditure - Corporate Social Responsibility as statutory obligation under Companies Act, 2013 - Expenditure "in furtherance of business" - Restriction on credit for goods disposed of by way of gift

Availability of input tax credit on CSR expenditure - Corporate Social Responsibility as statutory obligation under Companies Act, 2013 - Expenditure "in furtherance of business" - Input tax credit is available on tax paid for purchases made to fulfil corporate social responsibility obligations under Section 135 of the Companies Act, 2013. - HELD THAT: - The Authority accepted the applicant's factual position that the oxygen plant and spare parts were purchased and supplied to a hospital as part of the company's obligations under Section 135. The Companies Act imposes a mandatory spending obligation (including penal consequences for non-compliance) on companies meeting specified financial thresholds. The AAR reasoned that because the expenditure is mandated by statute and failure to incur it would materially affect the running of the business (including exposure to penalties), such expenditure is made "in the furtherance of business." Accordingly, the tax paid on purchases made to meet CSR obligations qualifies as input tax credit under the CGST and TGST/SGST provisions. The Authority treated CSR outlays as distinguishable from voluntary or occasional gifts (which are contemplated by the restriction on credit for goods disposed of by way of gift), holding that statutory compulsion and business exigency bring the expenditure within the ambit of business inputs eligible for credit. [Paras 7, 8]

The tax paid on purchases made to meet obligations under Section 135 of the Companies Act, 2013, is eligible for input tax credit as expenditure in furtherance of business.

Final Conclusion: The Authority ruled that CSR expenditure incurred pursuant to Section 135 of the Companies Act, 2013, including the purchase and donation of an oxygen plant, is in furtherance of business and the tax paid thereon is eligible for input tax credit under the GST Acts.

Authority for Advance Ruling - territorial nexus - jurisdiction of State AAR - advance ruling admissibility - registration requirement across States

Authority for Advance Ruling - territorial nexus - jurisdiction of State AAR - advance ruling admissibility - Whether the Telangana Authority for Advance Ruling can adjudicate the applicant's question regarding requirement of GST registration in other States for installation, testing and commissioning of antennas. - HELD THAT: - The Authority examined the territorial competence of a State Authority for Advance Ruling under the GST framework and noted that the Authority constituted under a State Goods and Services Tax Act is territorially linked to that State. Reliance is placed on the territorial nexus embodied in the statutory scheme (section 96 referenced by the Authority) to conclude that the Telangana AAR cannot adjudicate questions concerning liability or registration obligations arising under the CGST/SGST in a different State. Because the applicant's query related to registration requirements in other States where the work is to be executed, the Authority found that it lacked jurisdiction to give a ruling on those questions and therefore declined to decide the merits of the substantive issues raised. [Paras 7]

Application rejected for lack of territorial jurisdiction of the Telangana Authority for Advance Ruling to decide on GST registration liabilities in other States.

Final Conclusion: The application by the applicant seeking a ruling on the necessity of obtaining GST registration in other States for installation, testing and commissioning of antennas is rejected because the Telangana Authority for Advance Ruling lacks territorial jurisdiction to decide liabilities arising in other States.

Bogus purchases - corresponding sales - onus of proof on the assessee to substantiate purchases - reliance on information from Sales Tax Department - gross profit rate adjustment - remand for limited issue

Bogus purchases - corresponding sales - reliance on information from Sales Tax Department - onus of proof on the assessee to substantiate purchases - Whether the Tribunal was justified in deleting the addition on account of alleged bogus purchases given the Sales Tax Department's information and the assessee's burden to substantiate purchases. - HELD THAT: - The Tribunal's conclusion that the addition for alleged bogus purchases could not be sustained was founded on the fact that the assessment rested primarily on the Sales Tax Department's investigation without allowing cross-examination of persons named in that investigation and that the Assessing Officer had not completed independent inquiry. The Tribunal also recorded that the assessee had filed affidavits and confirmation letters from three dealers and that the Assessing Officer had not produced contrary evidence disputing those confirmations. The appellate view adopted by the CIT (Appeals) that where sales were not disputed, the case was of inflated purchases rather than impossible business transactions was accepted; if purchases were truly bogus it would be impossible to effect genuine corresponding sales. On these facts the Court held that questions (a), (b) and (c) did not raise substantial questions of law warranting interference with the Tribunal's order deleting the addition. [Paras 6, 7]

The Tribunal's deletion of the addition on account of alleged bogus purchases is not a substantial question of law and is upheld.

Gross profit rate adjustment - remand for limited issue - Whether the matter should be remanded to the Tribunal for reconsideration of the gross profit rate to be applied to the alleged Hawala purchases. - HELD THAT: - The Court found that the Tribunal did not address the specific question resolved by the CIT (Appeals) concerning application of a 5% gross profit rate on the alleged Hawala purchases as against the 0.69% rate declared by the assessee. Since this point was specifically considered by the CIT (Appeals) and not dealt with by the Tribunal, the Court remanded the matter to the Tribunal for limited adjudication on the correctness and quantum of the gross profit rate to be applied to the impugned purchases, directing the parties to appear before the Tribunal on the specified date and for the Tribunal to decide preferably within three months thereafter. [Paras 7]

Remand to the Tribunal for limited consideration of the proper gross profit rate to be applied to the impugned purchases.

Final Conclusion: The Tribunal's deletion of additions for alleged bogus purchases is sustained; however, the question of adjusting the gross profit rate (5% v. 0.69%) on the impugned purchases is remanded to the Tribunal for limited reconsideration, with directions to list and decide the matter within the timeframe indicated.

Reassessment proceedings - show cause notice under Section 148A(b) of the Income Tax Act, 1961 - misuse of PAN - fraudulent GST registration - authority of the Assessing Officer to adjudicate factual pleas - liberty to raise contentions before the Assessing Officer

Authority of the Assessing Officer to adjudicate factual pleas - reassessment proceedings - Whether the Assessing Officer is competent to determine the veracity of factual pleas (including alleged misuse of PAN and operation of bank accounts) arising from information received and whether reassessment proceedings should be quashed at this stage. - HELD THAT: - The Court examined the record and concluded that the averments made by the petitioner raise factual questions-such as alleged misuse of PAN, alleged fraudulent GST registration, and that the impugned transactions were not reflected in the petitioner's bank accounts-which fall within the competence of the Assessing Officer to investigate and adjudicate during reassessment proceedings arising from the show cause notice under Section 148A(b). The Court expressly declined to examine the merits of these contentions itself and observed that the AO must consider and determine the veracity of the pleas after examining the evidence during the reassessment process.

The reassessment proceedings are not quashed at this stage; the Assessing Officer is competent to inquire into and decide the factual pleas.

Liberty to raise contentions before the Assessing Officer - fraudulent GST registration - misuse of PAN - Relief to the petitioner in respect of procedural protection or direction to the Assessing Officer and the scope of the Court's intervention. - HELD THAT: - The Court disposed of the writ petition without adjudicating the merits, granting the petitioner liberty to raise all contentions and evidence before the Assessing Officer during the reassessment proceedings. The Court noted the petitioner's steps in reporting the alleged fraud to statutory and police authorities and recognised those as matters the AO may and should consider, but refrained from issuing any merits-based directions or quashing the proceedings.

Petition disposed with liberty to the petitioner to raise all pleas and contentions before the Assessing Officer; the Court did not decide the merits and left rights and contentions of parties open.

Final Conclusion: Writ petition disposed of; reassessment proceedings under the show cause notice remain extant for AY 2018-19, with the Assessing Officer directed to consider and adjudicate the petitioner's factual pleas (including alleged misuse of PAN and fraudulent GST registration); the Court did not examine merits and left parties' rights open.

Disallowance of commission and brokerage - onus of proof in relation to genuineness of expenditure - evidentiary value of payments made through banking channels - verification under section 133(6) and summons under section 131 - addition based on preponderance of probabilities or suspicion

Disallowance of commission and brokerage - onus of proof in relation to genuineness of expenditure - evidentiary value of payments made through banking channels - verification under section 133(6) and summons under section 131 - addition based on preponderance of probabilities or suspicion - Validity of the Assessing Officer's disallowance of commission and brokerage claimed by the assessee and extent to which the claimed payments were required to be disallowed for lack of proof - HELD THAT: - The Tribunal examined the facts that the assessee claimed commission/brokerage payments relating to acquisition of lands for a principal (M/s. Suzlon Gujarat Wind Park Ltd.), produced a list of 74 payees with identity documents, agreements, vouchers and that substantial payments were made through banking channels. The AO issued enquiries under section 133(6) to nine payees who did not respond and, without resorting to further steps such as summoning the payees under section 131, field verification or detailed bank-tracing, disallowed the entire claimed amount on the basis that non-response and absence of TDS records raised doubts as to genuineness. The Tribunal found that the assessee had discharged its onus by furnishing identities, agreements and bank evidence and that the AO adopted a casual approach by issuing limited enquiries and then making an addition based on suspicion or preponderance of probabilities. The Tribunal accepted the CIT(A)'s deletion of the addition in respect of the bulk of the claim, while holding that a limited disallowance in respect of the cash component (representing the portion which remained unsubstantiated after appreciation of the material) was justified. The Tribunal observed that mere payment through bank accounts is not invariably decisive of genuineness but, conversely, a failure by the AO to pursue available verification measures weakens the basis for a wholesale disallowance. The Tribunal therefore upheld the appellate authority's deletion of the impugned addition largely, but sustained a proportionate disallowance of the unverified cash element, recording that the limited disallowance should not be treated as precedent. [Paras 7]

The AO's blanket disallowance of the claimed commission and brokerage was not sustainable; the CIT(A)'s deletion of the addition is upheld except that a limited disallowance in respect of the unverified cash component is sustained.

Final Conclusion: Revenue's appeal is partly allowed: the majority of the addition made by the AO is deleted in accordance with the CIT(A)'s order, but a limited disallowance of the unverified cash component is sustained (appeal allowed in part), the Tribunal recording that its view on the limited disallowance is not to be treated as a precedent.

Penalty under section 271(1)(c) - Defective penalty notice - Concealment of particulars vs furnishing inaccurate particulars - Vitiation of penalty proceedings for ambiguity in show cause notice - Applicability of High Court precedent on notice defect

Penalty under section 271(1)(c) - Defective penalty notice - Concealment of particulars vs furnishing inaccurate particulars - Vitiation of penalty proceedings for ambiguity in show cause notice - Validity of penalty proceedings under section 271(1)(c) where the penalty notice did not specify whether it was for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal examined the notice issued under section 274 read with section 271(1)(c) and the assessment order and found that the Assessing Officer failed to strike out the non-applicable limb and did not specify whether the penalty was initiated for concealment or for furnishing inaccurate particulars. The Tribunal applied the ratio of the Hon'ble Bombay High Court in Ganga Iron & Steel Trading Co. which held that a show cause notice that does not indicate whether the allegation is concealment of particulars or furnishing inaccurate particulars vitiates the penalty proceedings. Since the defect goes to the root of initiation of penalty, the Tribunal held that the proceedings under section 271(1)(c) are not maintainable on the facts of the case and directed deletion of the penalty. [Paras 4, 5, 6, 7]

Penalty under section 271(1)(c) deleted as the show cause notice was defective for not specifying the applicable limb, thereby vitiating the penalty proceedings.

Final Conclusion: Following the jurisdictional High Court precedent, the Tribunal allowed the appeal and directed deletion of the penalty under section 271(1)(c) as the notice failed to specify whether it was for concealment of income or for furnishing inaccurate particulars, rendering the penalty proceedings unsustainable.

Revisional jurisdiction under section 263 of the Income Tax Act - erroneous order prejudicial to the interest of the Revenue - application of mind by the Assessing Officer - Explanation (2) to section 263 (Finance Act, 2012) - assessment completed under section 143(3) and assessment under section 144 read with section 153C

Revisional jurisdiction under section 263 of the Income Tax Act - erroneous order prejudicial to the interest of the Revenue - application of mind by the Assessing Officer - Explanation (2) to section 263 (Finance Act, 2012) - Whether the Principal Commissioner of Income Tax was justified in invoking revisional powers under section 263 to set aside the assessment order dated 31.12.2019. - HELD THAT: - The Tribunal held that both conditions for exercise of section 263 must be satisfied: the assessment order must be erroneous and such error must be prejudicial to the revenue. The PCIT challenged four items (payments/purchases from a supplier, depreciation on building improvements, depreciation on building under construction and certain creditors) which arose from the assessee's balance sheet. The Assessing Officer had before him the financial statements, queries and the assessee's replies and had chosen not to make additions, which the Tribunal found to be indicia that the AO had applied his mind. The PCIT's show cause and order were cryptic and did not explain how the AO's conclusions were erroneous or how revenue was prejudiced; instead the PCIT directed further verification. The Tribunal held that mere failure to record detailed reasons in the assessment order does not, without more, establish lack of application of mind; setting aside an assessment for further verification without demonstrating error prejudicial to revenue is impermissible under section 263 even after insertion of Explanation (2). Reliance by the PCIT on the Malabar Industrial ratio was misplaced because the PCIT did not point out specific errors or resultant prejudice. On the facts, the Tribunal concluded the AO had considered the issues and the revisional order was unjustified. [Paras 9, 10, 11, 12]

The revisional order passed by the Principal Commissioner of Income Tax under section 263 was quashed and the appeal of the assessee allowed.

Final Conclusion: The Tribunal quashed the PCIT's order under section 263 for AY 2017-18 on the ground that the AO had applied his mind to the issues and the PCIT failed to demonstrate that the assessment order was erroneous and prejudicial to the interest of the Revenue; the assessee's appeal is allowed.

Disallowance of interest under section 36(1)(iii) on advances for non-business purpose - disallowance under section 14A read with Rule 8D of the Income-tax Rules - confirmation of assessment order for non-appearance and failure to produce evidence

Disallowance of interest under section 36(1)(iii) on advances for non-business purpose - confirmation of assessment order for non-appearance and failure to produce evidence - Validity of disallowance of interest under section 36(1)(iii) on advances made to an individual alleged to be for non-business/investment purpose. - HELD THAT: - The Assessing Officer found that advances of Rs.3,91,00,000 were made to an individual and no interest charged, treated the advances as not for the assessee's business and disallowed imputed interest at 15% relying on precedent. The assessee did not file any submissions or evidentiary material in response to the show-cause during assessment or before the Commissioner (Appeals), despite multiple opportunities and notices. The CIT(A) considered the material on record and the statement of facts and, after giving the assessee ample time, confirmed the disallowance. On appeal the assessee again failed to appear or place evidence on record; therefore the Tribunal, after hearing the Departmental Representative and examining the available material, agreed with the reasons recorded by the CIT(A) and dismissed the ground of appeal. [Paras 8, 9]

Disallowance under section 36(1)(iii) confirmed; ground of appeal dismissed for failure to furnish evidence and non-appearance.

Disallowance under section 14A read with Rule 8D of the Income-tax Rules - confirmation of assessment order for non-appearance and failure to produce evidence - Validity of disallowance under section 14A read with Rule 8D for expenditure relatable to exempt income. - HELD THAT: - The Assessing Officer applied Rule 8D(2)(ii) and 8D(2)(iii) to compute and disallow an amount as expenditure in relation to tax-exempt income, noting inadequacy of details from the assessee about profits and utilisation for investments. The assessee filed submissions during assessment which were not accepted and later failed to produce supporting evidence before the CIT(A) despite repeated opportunities. The CIT(A) and thereafter the Tribunal found no material furnished by the assessee at appellate stages; in the absence of evidence and on the material available on record the disallowance was upheld. [Paras 11, 12]

Disallowance under section 14A r.w. Rule 8D confirmed; ground of appeal dismissed for lack of supporting evidence and non-appearance.

Final Conclusion: Both appeals for A.Y. 2013-14 and A.Y. 2014-15 are dismissed; the Tribunal upheld the disallowances under section 36(1)(iii) and section 14A r.w. Rule 8D on the record and in view of the assessee's failure to produce evidence or appear.

Unexplained expenditure - section 69C - cascading effect on opening stock - finality of appellate order - low tax effect

Unexplained expenditure - section 69C - cascading effect on opening stock - finality of appellate order - Deletion of addition of Rs.4,10,00,000/- made as unexplained expenditure under section 69C for A.Y. 2013-14 upheld. - HELD THAT: - The assessing officer treated the disclosure made following survey as unexplained expenditure under section 69C for A.Y. 2012-13 and, by treating the wrongly increased closing stock for F.Y. 2011-12 as requiring adjustment, made a corresponding addition of the same amount to income for A.Y. 2013-14 as a cascading effect on opening stock. The Commissioner (Appeals) directed deletion of the addition for A.Y. 2012-13, and that order has attained finality because the Department's appeal was dismissed on the ground of low tax effect. In these circumstances the Tribunal accepted the appellate conclusion that there was no merit in carrying forward the said addition to A.Y. 2013-14 and directed deletion of the addition made for A.Y. 2013-14. [Paras 3, 6]

Addition of Rs.4,10,00,000/- for A.Y. 2013-14 made under section 69C deleted and Revenue's appeal dismissed.

Final Conclusion: The appeal filed by the Revenue is dismissed; the addition of Rs.4,10,00,000/- for A.Y. 2013-14 under section 69C is deleted in view of the prior deletion for A.Y. 2012-13 which has attained finality.

Unexplained investment - on-money - proof of cash transactions from books of account - relevance of seized digital records

Unexplained investment - proof of cash transactions from books of account - relevance of seized digital records - Legitimacy of addition of Rs. 14,00,000 as unexplained investment on account of alleged cash payment for flat booking - HELD THAT: - The Tribunal found that the assessee had produced bank cheques, ledger entries and agreement evidencing payments totalling Rs. 43,26,000 to the builder account and subsequent refund by cheque after cancellation. The only material relied upon by the Department was an excel sheet seized from the builder's premises showing entries for "Planned (1) cheque" and "Planned (2)" and an internal chart indicating unaccounted cash; there was no material traced in the assessee's books establishing a cash payment of Rs. 14,00,000. The Assessing Officer did not identify any corresponding cash withdrawal or entry from the assessee's accounts proving payment in cash, and the assessee consistently denied any cash payment. In these circumstances the Tribunal held that mere presence of the assessee's name or a transaction reference in seized digital data, without corroboration from the assessee's own books or other independent evidence linking the assessee to a cash transaction, was insufficient to sustain an addition as unexplained investment. [Paras 7]

Addition of Rs. 14,00,000 as unexplained investment was deleted and the assessee's appeal was allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the addition of Rs. 14,00,000 as unexplained investment was not justified because there was no material in the assessee's books or other evidence proving a cash payment; entries in seized digital records alone did not satisfy the requirement for making the addition.

Reopening of assessment on the basis of excise show cause notice - reliance on excise show cause notice for making additions in income tax assessment - requirement of independent application of mind by assessing authority beyond excise proceedings - addition for suppression of sales based on valuation alleged by DGCEI - deletion of addition where excise proceedings are not finalised - precedential value of co ordinate bench and High Court decisions in identical factual matrix

Reopening of assessment on the basis of excise show cause notice - reliance on excise show cause notice for making additions in income tax assessment - requirement of independent application of mind by assessing authority beyond excise proceedings - addition for suppression of sales based on valuation alleged by DGCEI - Deletion of addition made on account of alleged suppression of sales for A.Y. 2007-08 where reassessment was initiated on the basis of material arising from excise proceedings and a show cause notice. - HELD THAT: - The assessing officer reopened the assessment under Section 147 on information from DGCEI and made additions by applying a gross profit rate to sales said to be suppressed and to under valuation computed by the excise authority. The appellate authority deleted the addition on the ground that the reassessment was based solely on the excise show cause notice without the assessing officer independently applying mind or conducting further inquiry; reliance was placed on the High Court decision in Futura Ceramics and the coordinate bench decision in Zirconia Cera Tech Glazes where additions founded only on an excise show cause notice (and not followed by independent conclusion by the tax authority or final excise orders) were held unsustainable. The Tribunal found no reason to depart from those precedents and held that making additions merely by adopting the contents of an excise show cause notice, without independent satisfaction or finalisation of excise proceedings, did not justify the reassessment addition; consequently the deletion by the CIT(A) was upheld. [Paras 3, 5, 6, 7]

Revenue's appeal for A.Y. 2007-08 dismissed; deletion of the addition sustained.

Precedential value of co ordinate bench and High Court decisions in identical factual matrix - application of earlier finding mutatis mutandis to subsequent year - Application of the A.Y. 2007-08 finding to A.Y. 2008-09 in absence of changed circumstances. - HELD THAT: - The Tribunal observed that the issue in A.Y. 2008-09 is identical to that in A.Y. 2007-08 and, in the absence of any change in facts or circumstances, applied the earlier conclusion mutatis mutandis. Therefore the reasoning that additions based solely on excise show cause notices without independent inquiry are unsustainable was extended to A.Y. 2008-09. [Paras 8]

Revenue's appeal for A.Y. 2008-09 dismissed by application of the earlier finding.

Final Conclusion: Both Revenue appeals for A.Y. 2007-08 and A.Y. 2008-09 are dismissed; additions based solely on excise show cause notices without independent application of mind or final excise orders are unsustainable and deletion by the CIT(A) is upheld.

Verification of bank deposits as business receipts - admission of additional evidence in the interest of natural justice - reliance on tax audit report under Section 44AB - addition under Section 68 of the Act - remand for fresh consideration

Verification of bank deposits as business receipts - reliance on tax audit report under Section 44AB - addition under Section 68 of the Act - admission of additional evidence in the interest of natural justice - remand for fresh consideration - Whether the deletion of the addition of Rs.5,10,00,700/- treated as unexplained cash deposits was sustainable or required fresh verification by the Assessing Officer - HELD THAT: - The Tribunal found that the First Appellate Authority had deleted the addition after admitting voluminous documents filed by the assessee and by placing weight on the fact that the books had been subjected to tax audit under Section 44AB. However, the Tribunal noted that the Assessing Officer had not verified key subsidiary records (sales/purchase registers, invoices, delivery proofs and suits) stated in his remand report, and that several documents had not been examined by the AO during assessment. The Tribunal held that a certificate of tax audit and the mere production of documents before the AO or CIT(A) did not, by itself, render the deposits incontrovertibly business receipts without verification. In view of the absence of proper verification on material points identified in the AO's remand report, the Tribunal concluded that the CIT(A)'s order deleting the addition was not justified on the record and that the controversy must be reopened for adjudication after verification of the evidence and opportunity to the assessee. Accordingly the matter was remitted to the Assessing Officer for fresh consideration and a reasoned order strictly in accordance with law. [Paras 7, 8]

Order of the CIT(A) deleting the addition is set aside and the matter is remitted to the Assessing Officer to verify the evidence mentioned in the remand report, to give the assessee opportunity of being heard and to pass a reasoned order; Revenue's appeal allowed for statistical purpose.

Final Conclusion: The Tribunal set aside the CIT(A)'s deletion of the addition and remitted the issue to the Assessing Officer for fresh verification of the assessee's evidence and for passing a reasoned order in accordance with law; the Revenue's appeal is allowed for statistical purposes.

Addition under Section 68 as unexplained cash credit - burden of proof on the Revenue to establish claimed income - onus shifts to Assessing Officer where assessee denies transaction and produces bank records - requirement to prove negative not imposed on assessee

Addition under Section 68 as unexplained cash credit - burden of proof on the Revenue to establish claimed income - onus shifts to Assessing Officer where assessee denies transaction and produces bank records - requirement to prove negative not imposed on assessee - Deletion of addition of alleged bogus profit where assessee denied transactions and produced bank records showing no receipt, and Revenue failed to produce cogent evidence linking assessee to the entries - HELD THAT: - The Tribunal found that the Assessing Officer relied solely on information from DGIT, Ahmedabad alleging commodity-trading profits credited to the assessee through a broker, but made no enquiries with the broker or the exchange nor produced account-opening/KYC or payment trail evidence. The assessee consistently denied having transacted, furnished return, balance sheet and bank passbook for the relevant period showing no such credits, and repeated the denial before the appellate authority. The CIT(A) nonetheless required the assessee to prove the negative, without seeking any remand or independent verification from the investigative source. Relying on precedents which place the burden on the department to establish that credited amounts belong to the assessee, the Tribunal held that once the assessee produced bank records and denied the transaction, the onus shifted to the Assessing Officer to prove that the assessee in fact earned the alleged profit. In absence of cogent evidence from the Revenue (no KYC, no broker/exchange confirmation, no payment trail), the addition as unexplained cash credit under Section 68 was unsustainable and was directed to be deleted. [Paras 9, 10, 11, 12, 13]

Addition of alleged bogus profit of Rs.3,96,370/- deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2011-12, deleting the addition made under Section 68 in absence of any cogent evidence from the Revenue after the assessee denied the transactions and produced bank records showing no such receipts.

Unexplained cash credits - verification of cash deposits during demonetisation - blanket exemption for cash deposits during demonetisation - cash out of earlier income or savings - binding nature of CBDT instructions - assessment under section 143(3) of the Income Tax Act - taxation under section 115BBE

Unexplained cash credits - verification of cash deposits during demonetisation - blanket exemption for cash deposits during demonetisation - cash out of earlier income or savings - binding nature of CBDT instructions - Deletion of addition of Rs.10,20,000 treated as unexplained cash credits - HELD THAT: - Assessee deposited Rs.10,20,000 of old currency notes during the demonetisation period. The Assessing Officer treated the deposits as unexplained cash credits and made an addition. Tribunal applied the CBDT press release and Instruction No.3/2017 which provides a source-specific verification regime and a cut-off (Rs.2.5 lakh per person; higher limit for senior citizens) for cash deposits during demonetisation. Because the bank account was used by both the assessee and his wife and the wife had no other operative account, the Tribunal allowed a combined blanket exemption of Rs.5,00,000 (Rs.2.5 lakh each). For the remaining amount (Rs.5,20,000), the Tribunal examined the material filed-returns of income for prior years, cash flow statements, bank passbook, cash withdrawals-and found the assessee met the verification criteria (income earned in past years and its source; filing of returns; cash withdrawals) and that the AO failed to rebut the explanation or show misuse of withdrawn cash. On these findings the Tribunal concluded the deposits were explained and deleted the addition. [Paras 12, 13, 15]

Addition on account of alleged unexplained cash credits of Rs.10,20,000 deleted and appeal allowed.

Taxation under section 115BBE - Claim challenging application of amended taxing provision held infructuous - HELD THAT: - Assessee challenged imposition of tax under section 115BBE as substituted retrospectively. Having decided ground relating to explanation of cash deposits in favour of the assessee and deleted the additions, the Tribunal held that the question of taxation under section 115BBE did not require adjudication and is rendered infructuous. [Paras 16]

Ground relating to taxation under section 115BBE is infructuous and not adjudicated.

Final Conclusion: Tribunal allowed the appeal for AY 2017-18, deleting the addition of Rs.10,20,000 treated as unexplained cash credits by applying CBDT instructions on verification of cash deposits during demonetisation and finding the assessee's explanations and supporting material satisfactory; the challenge to taxation under section 115BBE was held infructuous.

Addition under section 68 as unexplained cash credit - long term capital gains exemption under section 10(38) - addition under section 69C as unexplained expenditure (commission) - use of third party statements recorded in survey/inspection proceedings - right to cross examination of witnesses whose statements are relied upon - proof of genuineness of share transactions and paper/entry provider syndicate - application of human probabilities in judging genuineness of transactions

Addition under section 68 as unexplained cash credit - long term capital gains exemption under section 10(38) - use of third party statements recorded in survey/inspection proceedings - right to cross examination of witnesses whose statements are relied upon - Whether the long term capital gain of Rs.23,23,696/ claimed as exempt under section 10(38) could be treated as unexplained cash credit and added to the assessee's income under section 68. - HELD THAT: - The Tribunal examined the material relied upon by the AO and the CIT(A), including investigation reports and portions of statements recorded during survey/inspection operations which purportedly showed manipulation in penny stock scrips. The assessee produced documentary evidence (contract notes, demat entries, bank payments) and sought cross examination of third parties whose statements were relied upon by the Department; that request was refused by the lower authorities. The Bench found that the lower authorities had not placed cogent, corroborative material specifically connecting the assessee to the alleged accommodation entry operation and that the assessee was deprived of an opportunity to cross examine the persons whose statements were used against her. On the totality of facts and circumstances the Tribunal concluded that the confirmation of the addition rested on investigatory statements recorded behind the assessee without affording the opportunity of cross examination and that the AO/CIT(A) therefore were not justified in sustaining the addition. The Tribunal accordingly set aside the finding treating the claimed LTCG as unexplained cash credit.

Addition of Rs.23,23,696/ treated as unexplained cash credit under section 68 deleted and exemption under section 10(38) upheld.

Addition under section 69C as unexplained expenditure (commission) - use of third party statements recorded in survey/inspection proceedings - right to cross examination of witnesses whose statements are relied upon - Whether an amount estimated as 6% commission (Rs.1,45,421/ ) could be added as unexplained expenditure under section 69C on the basis of investigation statements and the Department's generalized findings about a syndicate charging commission for bogus entries. - HELD THAT: - The AO computed and added an amount as presumed commission on the basis of admissions in statements of other persons and investigation findings about a broader scheme. The assessee contested the computation and again sought cross examination and production of complete statements, which was not permitted. The Tribunal held that the reliance on third party investigatory statements without affording the assessee an opportunity to test that evidence and without specific corroborative material linking the assessee to payment of such commission was unsustainable. In absence of cogent evidence specifically establishing that the assessee paid the alleged commission, the addition under section 69C could not be sustained.

Addition of Rs.1,45,421/ under section 69C deleted.

Final Conclusion: The appeal is allowed: the Tribunal set aside the additions of Rs.23,23,696/ under section 68 and Rs.1,45,421/ under section 69C for Assessment Year 2014 15, primarily because the lower authorities relied on third party investigatory statements without affording the assessee an opportunity for cross examination and without placing cogent corroborative material specifically connecting the assessee to the alleged accommodation entry scheme.

Rectification under section 154 of the Income tax Act - reasonable opportunity of being heard under section 154(3) - mistake apparent on the record - change of opinion / review not permissible by rectification - assessing officer exceeding jurisdiction in rectification - admission of additional grounds under Rule 27 of the ITAT Rules, 1963 - allowability of exemption under section 54 in rectification proceedings

Rectification under section 154 of the Income tax Act - reasonable opportunity of being heard under section 154(3) - mistake apparent on the record - assessing officer exceeding jurisdiction in rectification - Validity of the assessing officer's rectification under section 154 - whether a mistake apparent on the record existed and whether the rectification complied with the requirement of a reasonable opportunity of being heard. - HELD THAT: - The Tribunal examined the assessment completed under section 143(3) where exemption under section 54 had been allowed after the assessee furnished particulars and supporting documents. The AO subsequently passed a rectification under section 154 reducing the exemption, relying on an audit objection but without demonstrating any mistake apparent on the record or explaining the factual or legal basis of such a mistake in the rectification order. The AO issued a single rectification notice and proceeded ex parte when the assessee did not appear. The Bench observed that rectification under section 154 is confined to correcting mistakes apparent from the record and cannot be used as a vehicle to review or change an opinion reached after considering evidence in the assessment proceedings. Where the AO does not identify and demonstrate a mistake apparent on the face of the record, and where the impugned action effectively amounts to revisiting a debatable conclusion or re weighing evidence, the AO exceeds the jurisdiction conferred by section 154. Separately, section 154(3) requires that an amendment which increases the assessee's liability not be made without giving notice of the proposed action and allowing the assessee a reasonable opportunity to be heard; a single cursory notice leading to ex parte rectification was held not to satisfy the statutory requirement of a reasonable opportunity in the facts of this case. Because the Revenue did not contest the CIT(A)'s finding on the absence of any demonstrated mistake apparent on record, and did not controvert that the assessee had placed material before the AO in the original proceedings, the Tribunal found no infirmity in the CIT(A)/NFAC order quashing the rectification and deleting the consequential addition.

Rectification order under section 154 was quashed for lack of jurisdiction (no mistake apparent on the record) and for violation of section 154(3) (no reasonable opportunity); the addition consequent to the rectification was deleted.

Admission of additional grounds under Rule 27 of the ITAT Rules, 1963 - allowability of exemption under section 54 in rectification proceedings - Whether the assessee may be permitted under Rule 27 to raise, and the Tribunal to decide, the additional legal ground that the rectification was not permissible because the matter was not a mistake apparent on the record. - HELD THAT: - The Tribunal considered the assessee's oral application and written submissions invoking Rule 27. Applying precedent and Rule 27's purpose, the Bench held that a respondent who succeeded before the lower authority may nevertheless support that favourable order by urging grounds decided against it, where those grounds bear directly on the outcome. The Tribunal noted that the legal ground challenging the competence to invoke section 154 was raised before the CIT(A) and relates directly to the validity of the rectification whose nullification affected the final result. Given that all relevant facts were on record and the Revenue had not controverted the absence of any mistake apparent on record, the Tribunal admitted the additional ground and adjudicated it on merits, following the authorities relied upon by the assessee.

Application under Rule 27 admitted; the additional ground challenging the competence to rectify under section 154 was entertained and allowed.

Final Conclusion: The Tribunal affirmed the CIT(A)/NFAC: the rectification under section 154 was without jurisdiction (no mistake apparent on record) and violated section 154(3) for want of a reasonable opportunity, and the consequential addition was deleted; the assessee's application under Rule 27 was admitted and the additional ground sustained. The Revenue's appeal is dismissed.

Erroneous and prejudicial to the interest of Revenue - Revisionary jurisdiction under section 263 - Limited scrutiny under CASS - Scope of record examinable in revision - Application of mind by Assessing Officer - Survey declaration and taxability under section 68 and section 115BBE - Verification under section 142(1)

Revisionary jurisdiction under section 263 - Limited scrutiny under CASS - Scope of record examinable in revision - Whether the Principal Commissioner of Income Tax rightly invoked revisional jurisdiction under section 263 in a case selected for limited scrutiny to reopen issues which were not part of the limited scrutiny reasons. - HELD THAT: - The Tribunal applied the twin conditions from Malabar Industries - the AO's order must be both erroneous and prejudicial to the revenue. Where a case is selected for limited scrutiny under CASS, the AO is required to confine enquiry to the specified issues unless the limited scrutiny is converted into full scrutiny by following prescribed procedures. The PCIT cannot, in exercise of section 263, treat as erroneous and prejudicial those aspects which were not within the scope of limited scrutiny and on which the AO had no occasion to examine or record an opinion. The term 'record' in the Explanation to section 263 must be read as the record on which the AO expressed his opinion. Following Coordinate Bench precedents, the Tribunal held that the Pr. CIT erred in assuming revisional jurisdiction to examine items outside the limited scrutiny selection and quashed the revisionary order. [Paras 12, 14, 18]

Ld. PCIT erred in invoking section 263 in respect of issues not covered by the limited scrutiny; the revisionary order is quashed and the AO's assessment is restored.

Application of mind by Assessing Officer - Verification under section 142(1) - Survey declaration and taxability under section 68 and section 115BBE - Whether the assessment order was erroneous and prejudicial because the AO failed to verify (a) the auditor's note about interest on TDS shown in Form 3CD and (b) the amount declared during survey proceedings. - HELD THAT: - The Tribunal examined the assessment record and found that the AO had raised the TDS discrepancy by issuing notices under section 142(1); the assessee explained that the figure in the tax audit report was a system error and the AO considered that explanation before completing the assessment. As regards the survey declaration, the assessee had disclosed the amount in profit and loss account and paid tax thereon; the AO examined the accounts and the claimed expenses and formed a view. Since the AO called for relevant information, considered the replies and applied his mind, the Tribunal found no lack of inquiry or failure of verification. The AO's exercise therefore did not amount to an order passed without application of mind or on incorrect assumption of fact and could not be characterised as erroneous and prejudicial to revenue. [Paras 15, 16, 17, 19]

The AO adequately verified the TDS discrepancy and the survey disclosure; the assessment order is not erroneous or prejudicial to the interest of the revenue.

Final Conclusion: The revisionary order dated 27.03.2022 passed by the Pr. CIT under section 263 is quashed; the assessment order dated 21.12.2019 for AY 2017-18 is restored and the assessee's appeal is allowed.

Confiscation under the Customs Act - redemption for re-export on payment of redemption fine - penalty under Section 112 of the Customs Act - retraction of statement on ground of duress - discretionary revisional power under section 129DD - judicial interference with discretionary orders: perversity and illegality

Retraction of statement on ground of duress - confiscation under the Customs Act - Validity of the retraction of the petitioner's statement and sufficiency of the statement-supporting recovery for sustaining the order of confiscation - HELD THAT: - The first appellate authority found that the petitioner's retraction was unsupported because the statement was corroborated by the recovery of gold from her person. The revisional proceedings did not disturb the factual finding that the recovery substantiated the recorded statement. The Court observed that there was nothing on the record to indicate that the statement had been recorded under pressure or duress and accordingly the retraction was of no value to the petitioner. The factual conclusion that the recovery supported the statement was accepted and no infirmity in that conclusion was shown. [Paras 4]

The retraction was rejected and the finding of recovery supporting the recorded statement is sustained.

Discretionary revisional power under section 129DD - redemption for re-export on payment of redemption fine - penalty under Section 112 of the Customs Act - judicial interference with discretionary orders: perversity and illegality - Validity of the revisional order which set aside confiscation, permitted redemption on payment of a redemption fine, and reduced/set aside penalties, and whether the High Court should interfere with that discretionary order - HELD THAT: - The revisional authority confirmed the underlying facts but exercised discretion to set aside confiscation and permit redemption for re export on payment of a redemption fine, reduced the penalty previously imposed and set aside a further penalty. The High Court examined whether there was any legal error or perversity in that exercise of discretion. The Court found the revisional order to be an exercise of discretion supported by the record and observed that no principle of law or factual perversity warranted judicial intervention. The respondents' counter affidavit supported the conclusion reached by the revisional authority. Given the discretionary character of the impugned order and the absence of demonstrable illegality or perversity, the Court declined to exercise writ jurisdiction to upset the revisional decision. [Paras 5, 6, 7, 9, 10]

The revisional order is valid; there is no ground for interference and the writ petition is dismissed.

Final Conclusion: The High Court declined to interfere with the revisional order which set aside confiscation subject to redemption on payment of a redemption fine and adjusted penalties; the appellate finding rejecting the petitioner's retraction was upheld and the writ petition was dismissed.

Limitation for refund claims where duty is paid under protest - computation of limitation period from appellate order where not otherwise provided - effect of "Save as otherwise provided in this section" in statutory construction - prematurity of refund claim pending departmental reassessment - obligation of department to carry out consequential reassessment after favourable appellate order - requirement to establish absence of unjust enrichment for refund claims

Limitation for refund claims where duty is paid under protest - effect of "Save as otherwise provided in this section" in statutory construction - Whether the refund claim was time-barred in view of Section 27 when duty was paid under protest and a Tribunal order in favour of the importer was rendered. - HELD THAT: - The Tribunal held that the second proviso to sub section (1) of Section 27, which excludes the one year limitation where duty has been paid under protest, remains operative despite insertion of sub section (1B). Sub section (1B) begins with 'Save as otherwise provided in this section' and therefore applies only except insofar as the section itself makes specific provision. Where duty has been paid under protest a specific provision exists (the proviso) excluding the one year limitation; accordingly sub section (1B) does not operate to make the one year period applicable. The Tribunal rejected the department's contention that issuance of a speaking order vacated the protest in circumstances where the dispute travelled to higher fora, and distinguished pre amendment decisions relied upon by the department as not governing the post amendment position. The result is that the refund claim cannot be rejected as time barred solely because more than one year elapsed from the date of the CESTAT order when the duty was paid under protest. [Paras 31, 32, 33, 34]

Rejection of the refund claim as time barred set aside; limitation of one year does not apply where duty was paid under protest.

Prematurity of refund claim pending departmental reassessment - obligation of department to carry out consequential reassessment after favourable appellate order - Whether the refund claim could be rejected as premature on the ground that departmental reassessment had not been completed despite a favourable Tribunal order. - HELD THAT: - The Tribunal found the Revenue's view that the claim was premature to be untenable in the facts: the department had accepted the CESTAT final order and no appeal was prosecuted, yet had not carried out the consequential reassessment. The department's prior contention before the High Court that it was 'contemplating' an appeal could not be used to deny relief. Inaction by the department in completing reassessment cannot justify rejection of the refund claim as premature where the appellate order setting aside enhancement has attained finality and the department has not pursued further appeal. [Paras 35]

Rejection of the refund claim as premature set aside; department directed to complete reassessment consequent to the Tribunal's order.

Requirement to establish absence of unjust enrichment for refund claims - obligation to produce supporting documents for refund claim - Whether the refund claim was properly rejected for being incomplete / not supported by documents and whether further enquiry on unjust enrichment was required. - HELD THAT: - The Tribunal accepted the appellant's contention that relevant documents (original Bills of Entry and Chartered Accountant certificate) were available and, in any event, that the department could verify copies given the litigation history. The Tribunal observed that the original authority had not had an opportunity to verify unjust enrichment aspects and accordingly remanded the matter for verification. The appellant is to be given an opportunity to furnish documents to prove absence of unjust enrichment and the original authority is to process the refund after reassessment and verification. [Paras 36, 37]

Matter remanded to the original authority to complete reassessment, verify documentation and decide unjust enrichment issue; appellant entitled to opportunity to produce documents.

Final Conclusion: Appeal partly allowed: rejection of refund on grounds of time bar and prematurity set aside. Matter remanded to the original authority to carry out consequential reassessment, allow the appellant to furnish documents on unjust enrichment, and process the refund within four months from the date of the order.

Service of demand notice in Form 3 - existence of operational debt and default - dispute of operational debt - limitation for filing Section 9 petition - admission of Section 9 petition and initiation of CIRP - operation of moratorium under Section 14 - appointment of Interim Resolution Professional

Service of demand notice in Form 3 - Demand notice dated 23.11.2020 was duly served on the corporate debtor. - HELD THAT: - The Tribunal considered the proof of dispatch and the tracking report placed on record which indicated delivery of the speed post containing the demand notice. No reply was received from the corporate debtor and the respondents proceeded ex parte. On these facts the Tribunal found that the demand notice had been properly served in accordance with Section 9 procedural requirements. [Paras 5, 6, 8]

The demand notice in Form 3 dated 23.11.2020 is held to have been properly served.

Dispute of operational debt - existence of operational debt and default - The operational debt claimed by the petitioner is undisputed and the petitioner proved the debt and the default. - HELD THAT: - The Tribunal noted that the corporate debtor did not appear or file any reply and had been proceeded against ex parte. The petitioner filed the statutory affidavit under Section 9(3)(b) stating service of the demand notice and placed invoices and account details showing the last payment and subsequent default. There was no notice from the corporate debtor asserting a dispute over the unpaid operational debt. On the material on record, including Form 5 and annexed invoices, the Tribunal concluded that the petitioner established existence of the operational debt and that default had occurred. [Paras 3, 4, 9, 11, 12]

The liability of the corporate debtor is held to be undisputed and the operational creditor has proved the debt and default.

Limitation for filing Section 9 petition - The petition under Section 9 was filed within the period of limitation as contended by the petitioner. - HELD THAT: - The Tribunal examined the date of default recorded in the petition (23.04.2019) and the date of filing of the Section 9 petition (12.08.2021). On this basis the Tribunal found that the application was filed within the limitation period applicable to the claim as presented in the petition. [Paras 4, 10]

The application is held to have been filed within limitation.

Admission of Section 9 petition and initiation of CIRP - operation of moratorium under Section 14 - appointment of Interim Resolution Professional - The Section 9 petition is admitted, moratorium is declared, and an Interim Resolution Professional is appointed. - HELD THAT: - Having found service of the demand notice, absence of a dispute, proof of debt and default, and compliance with filing requirements, the Tribunal held that the conditions of Section 9(5)(i) were satisfied. Consequently, the petition was admitted and the moratorium under Section 14 was imposed with its statutory effects on suits, asset disposition, actions to enforce security interests and recovery from possession. The Tribunal further dealt with the proposed IRP's credentials, noted expiry of the proposed IRP's AFA certification, and appointed an alternative Interim Resolution Professional from the IBBI panel, with directions regarding consent, vesting of management powers, duties under Sections 17-18, public announcement, constitution of Committee of Creditors, reporting and cooperation obligations, and interim funding by the petitioner to meet CIRP expenses. [Paras 13, 14, 15, 16, 17]

Petition admitted; moratorium declared with statutory consequences; Mr. Harish Malhotra appointed as Interim Resolution Professional with directions as recorded.

Final Conclusion: The Tribunal admitted the Section 9 petition filed by the operational creditor, holding that the demand notice was duly served, the debt and default were proved and undisputed, the petition was within limitation, and accordingly initiated the CIRP by imposing moratorium and appointing an Interim Resolution Professional with consequential directions.

Limitation and exclusion of period due to COVID-19 - default under Section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of financial debt evidenced by loan documents and records - appointment and eligibility of Interim Resolution Professional - declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - admission of petition under Section 7(5) of the Insolvency and Bankruptcy Code, 2016

Limitation and exclusion of period due to COVID-19 - Present application was filed within limitation. - HELD THAT: - The Tribunal noted the date of default as 30.09.2017 and that the last date for filing the Section 7 petition fell on 29.09.2020. The period from 15.03.2020 to 28.02.2022 was excluded for the purposes of limitation by the order of the Hon'ble Supreme Court in Suo-Moto Writ Petition (C) No. 3/2020 and subsequent directions, and therefore the petition filed on 01.07.2021 is within the prescribed limitation period. [Paras 8]

Petition held to be filed within limitation.

Default under Section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of financial debt evidenced by loan documents and records - There was a default in payment of the financial debt and the application in Form No.1 was complete. - HELD THAT: - On the material on record - sanction letters, working for computation of default, deposit of title deed, registration of charge, CERSAI report, record of default with Information Utility, various agreements (packaging credit, hypothecation, guarantee), statement of account, recall notice and NPA certificate - the Tribunal found that the financial creditor had established default. The corporate debtor proceeded ex parte and did not rebut the claim. The petition in prescribed Form No.1 was therefore complete for the purposes of admission under Section 7. [Paras 9]

Default established and application found complete.

Appointment and eligibility of Interim Resolution Professional - Proposed Interim Resolution Professional was eligible and appointed. - HELD THAT: - The proposed IRP, Mr. Hemanshu Jetley, was supported by Form No.2 and the IBBI certificate. The Tribunal's internal check revealed no adverse material or disciplinary proceedings against him. Consequently, he was appointed as Interim Resolution Professional and directed to perform the statutory duties under the Code and Regulations. [Paras 10]

Mr. Hemanshu Jetley appointed as Interim Resolution Professional.

Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - admission of petition under Section 7(5) of the Insolvency and Bankruptcy Code, 2016 - The Section 7 petition was admitted and moratorium under Section 14 was declared with the statutory prohibitions. - HELD THAT: - Having found the petition complete and default established above the threshold, and with no bar on the proposed IRP, the Tribunal admitted the petition under Section 7(5). Consequent upon admission, the statutory moratorium was declared and the prohibitions enumerated under Section 14 were imposed. Directions were issued to the IRP regarding constitution of the Committee of Creditors, filing of reports, and conduct of CIRP, and the financial creditor was directed to deposit funds for IRP expenses as per the Regulations. [Paras 12, 13]

Petition admitted; moratorium imposed and directions issued for CIRP.

Final Conclusion: The Section 7 petition filed by the financial creditor was admitted: the petition was held to be within limitation (COVID-19 period excluded), default and financial debt were established on the material produced, the proposed Interim Resolution Professional was found eligible and appointed, and moratorium under Section 14 was declared with directions for constitution of the Committee of Creditors and conduct of the CIRP.

Jurisdiction of adjudicating authority based on registered office - pre-existing dispute under section 8(2) of the Insolvency and Bankruptcy Code - acknowledgement of debt as admission - default and initiation of CIRP under section 9 of the Insolvency and Bankruptcy Code - limitation for filing under Section 18 of the Limitation Act, 1963 - moratorium under section 14 of the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional

Jurisdiction of adjudicating authority based on registered office - This Tribunal has territorial jurisdiction to entertain the petition. - HELD THAT: - The Corporate Debtor's registered office is located in Mumbai. The Tribunal applied the principle that the Adjudicating Authority for insolvency resolution of a corporate person is the NCLT having territorial jurisdiction over the place where the registered office of the corporate person is located. The invoices' contractual forum clause in Uttar Pradesh did not oust the Tribunal's jurisdiction to entertain the section 9 petition where the corporate debtor's registered office falls within this Bench's territorial jurisdiction. [Paras 3, 11, 12]

Jurisdictional objection based on invoice/forum clause rejected; the Bench has jurisdiction.

Acknowledgement of debt as admission - pre-existing dispute under section 8(2) of the Insolvency and Bankruptcy Code - The Corporate Debtor's communications amounted to an admission of liability and therefore the plea of a pre existing dispute was rejected. - HELD THAT: - The Tribunal examined the Corporate Debtor's letter dated 23.07.2021 to CITI Commercial Bank and e mail(s) including that of 13.05.2021. It held that the letter plainly certified that specified invoices were outstanding 'as per our books' and confirmed that the Corporate Debtor 'shall clear the said invoices, at the earliest', and that the email acknowledged willingness to pay extra on old outstanding. On that factual foundation the Bench concluded that there was an unequivocal acknowledgement of debt and not a continuing pre existing dispute. Accordingly, the Corporate Debtor's contention that disputes raised earlier regarding quality of goods constituted a pre existing dispute under section 8(2) was found unsustainable in light of the admissions. [Paras 19, 21, 22, 24, 25]

Pre existing dispute plea rejected; the letter and emails disclose admission of debt.

Limitation for filing under Section 18 of the Limitation Act, 1963 - The petition was filed within the period of limitation. - HELD THAT: - The Bench noted the Corporate Debtor's acknowledgment of liability on 23.07.2021 and the petition filing date of 21.10.2021. Applying the three year limitation period, the Tribunal found the petition to be within the prescribed limitation period and therefore not time barred. [Paras 26]

Petition held to be within limitation.

Default and initiation of CIRP under section 9 of the Insolvency and Bankruptcy Code - moratorium under section 14 of the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional - The section 9 petition is admitted; CIRP is initiated, moratorium imposed and an Interim Resolution Professional appointed. - HELD THAT: - Having found that the debt is due and payable, default is established and the petition is complete and within jurisdiction and limitation, the Tribunal admitted the application under section 9. Consequential directions were issued: moratorium under section 14 to operate from the date of the order until completion of CIRP or further order; public announcement as per section 13 read with the IBBI regulations; appointment of Mr. Rakesh Kumar Tulsyan as Interim Resolution Professional with directions regarding his functions and compliance; and operational directions including vesting of management in the IRP and deposit by the Operational Creditor towards initial expenses. The Bench also noted the absence of a proposed IRP name from the Operational Creditor and recorded that the debt exceeded Rupees One Crore. [Paras 27, 28, 30, 31]

Application under section 9 admitted; CIRP ordered, moratorium imposed and IRP appointed.

Final Conclusion: The Tribunal admitted the section 9 petition by the Operational Creditor against the Corporate Debtor, holding that it has territorial jurisdiction, that the Corporate Debtor had admitted the outstanding invoices (negating a pre existing dispute), and that the petition was within limitation; accordingly CIRP was initiated, moratorium imposed and an Interim Resolution Professional appointed.

Liberty to restore withdrawn petition - withdrawal of CIRP application - Rule 48 and Rule 49 of NCLT Rules - restoration - Order XXIII CPC - restoration/set aside of compromise decree - cause of action merged with settlement - competent authority (as an alternative remedy) excludes NCLT - IBC is not a money recovery proceeding

Liberty to restore withdrawn petition - Rule 48 and Rule 49 of NCLT Rules - restoration - competent authority (as an alternative remedy) excludes NCLT - The competent authority mentioned in the order dated 29.01.2021 excludes the NCLT and did not grant liberty to restore the withdrawn petition before this Adjudicating Authority. - HELD THAT: - There is no provision in the IBC, 2016 or the NCLT Rules, 2016 that permits granting a liberty to restore a petition finally disposed of as withdrawn. Rules (48) and (49) of the NCLT Rules apply to restoration of applications dismissed for default or decided ex parte, but do not authorize revival of a petition withdrawn by consent. By analogy Order XXIII CPC and Order XXIII, Rule 3A (which permits setting aside a compromise decree obtained by fraud or misrepresentation) do not assist where a settlement was voluntarily executed without allegation of fraud. The memo filed by the petitioner sought an alternative prayer - liberty to initiate appropriate proceedings before the NCLT and/or any other remedy - but the order expressly granted only liberty to initiate proceedings before the competent authority and did not grant liberty to approach the NCLT to revive the withdrawn petition. A relief not expressly granted is deemed refused; accordingly the competent authority referred to in the order excludes the NCLT and no liberty to revive the petition was conferred. [Paras 6, 7, 8, 9]

The order of 29.01.2021 did not confer liberty to approach NCLT for restoration; the competent authority referenced excludes this Adjudicating Authority.

Withdrawal of CIRP application - cause of action merged with settlement - IBC is not a money recovery proceeding - C.P. No.2/KOB/2021 cannot be restored and the restoration application is dismissed. - HELD THAT: - Once the lis was validly settled and the petition withdrawn by consent, the cause of action merged with the settlement and ceased to exist as a live proceeding; breach of the settlement gives rise to a fresh cause of action but does not revive the earlier withdrawn petition. The applicant sought revival to enforce what is essentially a money claim through IBC; the Tribunal reiterated that IBC is not a money-recovery mechanism and that the order granting only alternative liberty to approach competent authorities, without expressly permitting restoration before NCLT, leaves no room for restoration. Earlier authorities relied upon by the applicant concerned different factual orders where liberty to revive or to file fresh petitions was expressly granted or dealt with on appeal; they are distinguishable. In view of these considerations, the restoration application under Rule 11 is not maintainable and is dismissed. [Paras 9, 11, 12, 13]

The restoration application is dismissed and C.P. No.2/KOB/2021 is not restored.

Final Conclusion: Application under Rule 11 for restoration is dismissed: the earlier order of 29.01.2021 did not grant liberty to restore the withdrawn petition before NCLT (it granted only liberty to initiate appropriate proceedings before the competent authority), and a withdrawn petition settled by consent cannot be revived under the existing IBC/Rules framework; consequently C.P. No.2/KOB/2021 is not restored.

Execution of IBC orders - Attachment and sale of properties by liquidator - Power of liquidator under Section 35(2) of the IBC - Regulation 33 of Schedule I to the IBBI (Liquidation Process) Regulations, 2016 - Inapplicability of Section 424(3) of the Companies Act, 2013 for execution of IBC orders - Inapplicability of Rule 56 of the NCLT Rules, 2016 to IBC liquidation execution - Ouster of Civil Courts by Section 231 of the IBC

Inapplicability of Section 424(3) of the Companies Act, 2013 for execution of IBC orders - Ouster of Civil Courts by Section 231 of the IBC - Whether an execution application under Section 424(3) Companies Act, 2013 is maintainable to execute an order passed under Section 66 of the IBC. - HELD THAT: - The Tribunal held that Section 424(3) of the Companies Act, 2013 is not an enabling provision to execute orders of the Adjudicating Authority under the IBC; it merely contemplates reference of Tribunal orders to Civil Courts for execution. Section 231 of the IBC ousts the jurisdiction of Civil Courts in respect of matters falling under the Code. Consequently, execution cannot be pursued under Section 424(3) of the Companies Act where the IBC regime applies and ousts Civil Court jurisdiction. The Tribunal therefore declined to sustain the application insofar as it was founded on Section 424(3). [Paras 8, 9]

Application founded on Section 424(3) Companies Act, 2013 is not maintainable for executing an IBC order and cannot be proceeded with under that provision.

Inapplicability of Rule 56 of the NCLT Rules, 2016 to IBC liquidation execution - Execution of IBC orders - Whether Rule 56 of the NCLT Rules, 2016 is applicable to execution of orders in IBC liquidation proceedings before the Adjudicating Authority. - HELD THAT: - The Tribunal observed that the IBC is a self-contained code with its own procedures and that specific provisions and rules under the IBC and its Regulations govern execution and enforcement in insolvency and liquidation matters. Reliance on Rule 10(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 indicates limited application of certain NCLT Rules pending notification of full IBC procedure rules. The Tribunal concluded that Rule 56 NCLT Rules, 2016 is not applicable to proceedings under the Code and that it is unnecessary and impermissible to invoke general Companies Act or NCLT Rules provisions in place of the IBC's own framework. [Paras 10]

Rule 56 of the NCLT Rules, 2016 is not applicable to execution of IBC orders before the Adjudicating Authority; execution must follow the IBC/Regulations.

Power of liquidator under Section 35(2) of the IBC - Attachment and sale of properties by liquidator - Regulation 33 of Schedule I to the IBBI (Liquidation Process) Regulations, 2016 - Whether the liquidator is empowered to attach and sell properties recorded in the name of respondents to satisfy liabilities determined under Section 66 IBC, and the procedures to be followed. - HELD THAT: - The Tribunal affirmed that Section 35(2) of the IBC empowers the liquidator to take custody and control of all properties and actionable claims of the corporate debtor. Where directors have perpetrated fraudulent transactions rendering them personally liable under Section 66 (as adjudicated), the corporate debtor (through the liquidator) has actionable claims against properties held by those respondents. Regulation 33 of Schedule I to the IBBI (Liquidation Process) Regulations, 2016 prescribes modes for sale (public auction and private sale) which the liquidator may employ. The Tribunal noted the need to protect third-party interests until sale and directed procedural steps for attachment, notification to sub-registrars, taking custody of title deeds, affixing warrants of attachment, symbolic possession where tenanted, and sale in accordance with Regulation 33; police aid may be availed if necessary. [Paras 13, 16]

Liquidator is empowered to attach and sell the schedule properties (belonging to the respondents) in accordance with Section 35(2) IBC and Regulation 33 of the IBBI (Liquidation Process) Regulations, 2016, subject to protective procedural steps ordered by the Tribunal.

Final Conclusion: The Tribunal dismissed reliance on Section 424(3) Companies Act and Rule 56 NCLT Rules for execution of an IBC order, held that execution must proceed under the IBC and its Regulations, and directed attachment, protection and sale of the schedule properties by the liquidator in accordance with Section 35(2) IBC and Regulation 33 of the IBBI (Liquidation Process) Regulations, 2016, with ancillary directions for notification, custody, symbolic possession and sale. No costs.

Assessee's acceptance of tax liability - classification as Sale of Space or Time for Advertisement - search revealing undisclosed taxable service - penalty under Section 76 (simultaneous penalty) - penalty under Section 77 and 78 (penalty for suppression)

Assessee's acceptance of tax liability - classification as Sale of Space or Time for Advertisement - Appellant accepted liability for service tax and did not contest taxability of the services rendered. - HELD THAT: - The Commissioner (Appeals) recorded that the appellant accepted the liability to pay service tax of Rs. 1,40,190/- along with applicable interest and did not contest the taxability. The appellate tribunal treated that admission as settling the question of tax liability and classification of the services, leaving only the question of penalties for adjudication. [Paras 4]

Tax liability and classification as taxable service were not contested and are treated as accepted.

Penalty under Section 76 (simultaneous penalty) - Validity of penalty imposed under Section 76. - HELD THAT: - The tribunal found that imposition of simultaneous penalty under Section 76 is not sustainable in view of the precedent of the Gujarat High Court in Raval Trading Company (2016 (42) STR 210-(Guj.)). Applying that principle, the penalty imposed under Section 76 was held to be not maintainable. [Paras 5]

Penalty under Section 76 set aside.

Search revealing undisclosed taxable service - penalty under Section 77 and 78 (penalty for suppression) - Sustainability of penalties under Sections 77 and 78 for suppression of facts. - HELD THAT: - The tribunal noted that the case was founded on a departmental search which disclosed that the appellant had not disclosed their activity or registration and had suppressed facts from the department. On that factual foundation the tribunal held that penalties under Sections 77 and 78 were rightly imposed for suppression and deliberate nondisclosure, and therefore upheld those penalties. [Paras 6]

Penalties under Sections 77 and 78 upheld.

Final Conclusion: Appeal partly allowed: tax liability and classification treated as accepted; penalty under Section 76 set aside; penalties under Sections 77 and 78 upheld; appeal otherwise dismissed.

Cost sharing - business support services - rendition of service - payment by book adjustment in transactions with associated enterprises (prospective amendment)

Cost sharing - rendition of service - business support services - Whether amounts billed between the appellant and its associated enterprise under a cost sharing arrangement constitute consideration for rendition of taxable services (business support services) and thus attract service tax for the period 01.04.2005 to 31.03.2008. - HELD THAT: - The Tribunal found that the arrangement between the appellant and its associated companies was in the nature of sharing common costs for joint functions and procuring services jointly, not the provision of any specific service by the appellant to the associates. The factual matrix, including admissions in returns and the cost sharing agreement and statements, showed that the appellant merely procured services and recovered allocated shares as reimbursements. Reliance was placed on the reasoning in Gujarat State Fertilizers & Chemicals Ltd. (apex court) and on Tribunal decisions which hold that where one party merely shares costs or acts as an agent to procure common services without charging consideration as payment for a service, such receipts are reimbursements and not consideration for taxable business support services. The revenue failed to identify any specific service provided by the appellant to its associates that would fall within the inclusive specifications of business support services. The Tribunal therefore concluded that the cost sharing transactions did not amount to rendition of taxable service and the demand could not be sustained.

Demand of service tax on the cost sharing amounts (classified as business support services) for the period 01.04.2005 to 31.03.2008 is unsustainable and is set aside.

Payment by book adjustment in transactions with associated enterprises (prospective amendment) - rendition of service - Whether the substituted Explanation (treating debit/credit/book adjustments with associated enterprises as 'payment') with effect from 10.05.2008 could be applied to the waiver effected on 31.03.2008. - HELD THAT: - The Tribunal noted the substitution to the Explanation which, from 10.05.2008, expressly treated amounts credited by way of book adjustments in transactions with associated enterprises as 'payment'. The waiver in the present case was recorded on 31.03.2008, prior to the effective date of that amendment. Since the amended explanation is prospective, it could not be invoked to treat the pre amendment book adjustment/waiver as receipt of consideration attracting service tax. Even on merits the Tribunal found no rendition of service, but as a separate point the amended Explanation could not be applied retrospectively to create liability for the period under dispute.

The post 10.05.2008 amendment to treat book adjustments with associated enterprises as 'payment' is not applicable to the waiver recorded on 31.03.2008 and cannot sustain the demand for the period in issue.

Final Conclusion: The appeal is allowed; the demand of service tax (and consequent interest and penalty) confirmed by the adjudicating authority in respect of cost sharing transactions with the associated enterprise for 01.04.2005 to 31.03.2008 is set aside, the Tribunal holding that the transactions were reimbursements under a cost sharing arrangement and did not constitute rendition of taxable business support services, and that the later amendment treating book adjustments as 'payment' is not applicable to the pre amendment waiver.

Eligibility of cenvat credit on input services - non-taking of Input Service Distributor registration as a procedural error - admissibility of cenvat credit on bank charges when supported by bank advices/statements - validity of invoices addressed to company with additional reference to individual (Kartha) - departmental burden to demonstrate discrepancy in supporting documents

Eligibility of cenvat credit on input services - non-taking of Input Service Distributor registration as a procedural error - admissibility of cenvat credit on bank charges when supported by bank advices/statements - departmental burden to demonstrate discrepancy in supporting documents - Credit availed on bank charges cannot be denied solely because the appellant had not taken Input Service Distributor registration or because credit was claimed on bank debit advices/statements instead of invoices. - HELD THAT: - The Tribunal followed the jurisdictional High Court decision that non-taking of ISD registration is a procedural defect which does not disentitle an unregistered input service distributor from availing cenvat credit; therefore denial of credit on that ground is unsustainable. The department did not dispute levy of bank charges by the bank; mere reliance on bank advices/debit statements does not justify denial unless the documents themselves contain discrepancies. An allegation in the show cause notice, unaddressed in the adjudicating orders and unsupported by demonstration of discrepancy, is insufficient to withhold credit. Accordingly, the denial of bank-charge credit on the dual grounds of absence of ISD registration and reliance on bank advices/statements was set aside. [Paras 8, 9]

Denial of cenvat credit on bank charges on account of non-registration as ISD and on the ground that credit was taken on bank advices/statements is quashed; credit is allowed subject to absence of any discrepancy in supporting documents.

Eligibility of cenvat credit on input services - validity of invoices addressed to company with additional reference to individual (Kartha) - non-taking of Input Service Distributor registration as a procedural error - Credit availed on Chartered Accountant services cannot be denied on the basis that the bills were issued in the name of an individual or other units where the invoices on record are addressed to the appellant-company (albeit mentioning the Kartha's name), nor can denial be sustained for absence of ISD registration. - HELD THAT: - The show cause notice alleged that certain CA bills were in the name of an individual or other units. Examination of the bills produced before the Tribunal showed they were addressed to the appellant-company with the Kartha's name also mentioned; such notation does not convert the bills into instruments issued to an individual. The same principle regarding ISD registration as a procedural error applies. The factual finding that the bills are in the name of the company renders the denial factually incorrect and unsustainable; accordingly credit in respect of the CA services must be permitted. [Paras 10]

Denial of cenvat credit on Chartered Accountant services on grounds that bills were issued to an individual/other units and for non-registration as ISD is set aside; credit allowed.

Final Conclusion: The impugned order is set aside and the appeal is allowed; credits availed on bank charges and Chartered Accountant services are held to be admissible for the reasons stated, with consequential relief as per law.

Refund of unspent PLA balance - applicability of Section 11B to PLA refund - unjust enrichment not applicable to PLA refund - Board circular permitting refund of PLA balance - Rule 9(1A)/Rule 173G(1A) procedure for withdrawal from PLA - binding effect of Tribunal precedents

Refund of unspent PLA balance - applicability of Section 11B to PLA refund - Board circular permitting refund of PLA balance - Rule 9(1A)/Rule 173G(1A) procedure for withdrawal from PLA - unjust enrichment not applicable to PLA refund - binding effect of Tribunal precedents - Whether the limitation and procedural bars under Section 11B of the Central Excise Act apply to a claim for refund of the unspent balance in a Personal Ledger Account (PLA) and whether the appellant is entitled to refund of the PLA balance. - HELD THAT: - The Tribunal examined earlier decisions of the forum and a Board circular which treat unutilised PLA deposits as advances belonging to the depositor until appropriated towards duty on clearance of goods. The unspent PLA balance does not become excise duty merely by deposit; it attains the character of duty only upon appropriation for payment of duty. In that legal matrix, the limitation and procedural scheme of Section 11B (which governs refund of duty) and the doctrine of unjust enrichment do not apply to withdrawal/refund of unutilised PLA balances. The Tribunal relied on its prior decisions, and on the Board instruction dated 06.01.1973, and observed that Rules providing the procedure for withdrawal from PLA (Rule 9(1A)/Rule 173G(1A)) govern such refunds rather than Section 11B. A contrary decision (Valson Polyester Ltd) was distinguished on the ground that it did not consider the Tribunal precedents and the Board circular. Applying these authorities, the Tribunal held that the appellant is entitled to the refund of the PLA balance and that limitation under Section 11B is not attracted. [Paras 4, 5]

Appeal allowed; appellant entitled to refund of unspent PLA balance and Section 11B limitation/procedure does not apply.

Final Conclusion: The Tribunal allowed the appeal, holding that unutilised deposits in the PLA are advances belonging to the depositor and are refundable under the Rules and Board instruction; Section 11B (and the limitation/unjust enrichment principles applicable to duty refunds) does not apply to such PLA refunds.

Remission under Rule 21 of Central Excise Rules - unavoidable incident / natural cause - valuation in insurance claim and recovery of excise element - reversal of CENVAT credit in respect of inputs contained in destroyed final product

Remission under Rule 21 of Central Excise Rules - unavoidable incident / natural cause - Entitlement to remission of central excise duty for goods destroyed in fire on ground that the loss was caused by an unavoidable incident / natural cause. - HELD THAT: - The adjudicating authority held that the fire was avoidable due to alleged lack of firefighting measures and post-2014 non-expenditure on such measures. The Tribunal rejected that conclusion, accepting documentary and official reports (Inspector of Police, Fire Brigades, Deputy Director, Industrial Health and Safety, Nagarpalika) which attribute the fire to an electric short circuit on 07.01.2017. The Tribunal reasoned that once firefighting equipment was installed up to January 2014 there was no requirement to show continuous expenditure thereafter and the absence of expenditure after 2014 did not establish lack of equipment or negligence. The short circuit was held to be beyond the control of the appellant and not predictable, and there was no suggestion of deliberate conduct by the assessee to permit the fire. Applying Rule 21, the Tribunal concluded the loss was by natural cause/unavoidable incident and remission is therefore admissible. [Paras 5]

Remission of duty granted as the fire was an unavoidable incident/natural cause and the appellant had taken adequate firefighting precautions.

Valuation in insurance claim and recovery of excise element - reversal of CENVAT credit in respect of inputs contained in destroyed final product - Whether enhancement in the insured valuation per kg amounted to recovery of the excise element and thereby disentitled the appellant from remission; and related compliance on CENVAT credit. - HELD THAT: - The adjudicating authority treated the higher insured price per kg as including excise duty and thus as recovery of duty from the insurer, rendering remission inadmissible. The Tribunal examined the calculation and materials and found the enhancement from Rs. 139 to Rs. 149.16 per kg was attributable to selling and marketing expenses and did not include the Central Excise duty. Consequently, there was no recovery of excise duty from the insurer that would bar remission. The Tribunal nevertheless observed that the appellant must reverse CENVAT credit, if any, attributable to inputs contained in the destroyed final product before remission is allowed. [Paras 5, 6]

Enhancement in insurance valuation does not include excise duty; remission cannot be denied on that ground. Appellant must reverse any CENVAT credit pertaining to inputs in the destroyed goods.

Final Conclusion: Impugned order set aside; appeal allowed and remission of central excise duty granted for goods destroyed in the fire, subject to reversal of any CENVAT credit attributable to inputs contained in the destroyed final product.

Classification between Chapter 48 and Chapter 49 - Chapter Note 12 and Chapter Note 14 of Chapter 48 - printing not merely incidental - intended to be used for further printing or writing - general rules for interpretation of the tariff - classification guided by CBIC circular and HSN explanatory notes - extended period of limitation

Classification between Chapter 48 and Chapter 49 - Chapter Note 12 and Chapter Note 14 of Chapter 48 - printing not merely incidental - classification guided by CBIC circular and HSN explanatory notes - Folders for inserting certificates (pre-printed with board logo/text) are not classifiable under Chapter 48 and appeal against re classification is allowed. - HELD THAT: - The Tribunal examined Chapter Notes 12 and 14 of Chapter 48 and the CBIC circular interpreting those notes together with HSN explanatory notes. The governing criterion is whether the printing on paper products is merely incidental to primary use or whether the printing imparts the essential character such that further printing or writing is not required. Where printing at the time of clearance provides the product's essential character and no further printing/writing is intended, such goods fall in Chapter 49. Applying this principle to the folders for inserting certificates-printed with specific text/logo and distributed with marksheets so as not to require further printing-the Tribunal found the classification under Chapter 48 incorrect and allowed the appeal. [Paras 5, 9]

Appeal allowed in respect of the folders for inserting certificates; re-classification under Chapter 48 set aside.

Classification between Chapter 48 and Chapter 49 - Chapter Note 12 and Chapter Note 14 of Chapter 48 - intended to be used for further printing or writing - extended period of limitation - Letter heads/pads, invitation cards and envelopes - demand challenged only on limitation - extended period of limitation cannot be invoked and appeal is allowed. - HELD THAT: - The Tribunal observed that the dispute involved interpretation of chapter notes where a bonafide belief as to classification could exist. Having regard to the CBIC clarification and the nature of the controversy, it was open for the appellants to hold a bonafide belief concerning classification of these items. In such circumstances, the extended period of limitation could not be invoked by the Revenue. Accordingly the appeals in respect of items classified as letter heads/pads, invitation cards and envelopes were allowed on limitation grounds. [Paras 8, 9]

Appeals allowed in respect of letter heads/pads, invitation cards and envelopes on limitation; extended period not invoked.

Classification between Chapter 48 and Chapter 49 - Chapter Note 12 and Chapter Note 14 of Chapter 48 - printing not merely incidental - classification guided by CBIC circular and HSN explanatory notes - Classification of waste paper was not decided on merits and is remanded to the adjudicating authority for fresh decision. - HELD THAT: - The Tribunal found that the impugned order contained no discussion or findings on the classification of waste paper (item No. 3). As there were no specific findings in the Order in Original or the impugned order on this issue, the Tribunal set aside the decision insofar as waste paper is concerned and remitted the matter to the original adjudicating authority for fresh consideration in accordance with law. [Paras 7, 9]

Impugned order set aside in respect of waste paper and matter remanded to the original adjudicating authority for fresh decision.

Final Conclusion: The Tribunal allowed the appeal in respect of the folders for inserting certificates and allowed the appeals relating to letter heads/pads, invitation cards and envelopes on limitation grounds; the adjudicating authority's classification of waste paper was set aside and remanded for fresh decision.

Departmental guidelines for institution and withdrawal of prosecution - monetary threshold for launching prosecution - estoppel by departmental circular - effect of CENVAT credit on quantification of duty demand for prosecution threshold - presumption of innocence and evidentiary weight of an acquittal

Departmental guidelines for institution and withdrawal of prosecution - monetary threshold for launching prosecution - estoppel by departmental circular - Whether prosecution could be lawfully continued or initiated in view of departmental circulars prescribing guidelines and an enhanced monetary limit for prosecution - HELD THAT: - The Sessions Judge relied on Exs.D6 and D7 (in-house circulars of the Central Excise Department) which framed guidelines for instituting prosecution and prescribed an enhanced monetary limit of Rs.25 lakhs prospectively from 12.12.1997. The appellate court found that the complainant was estopped from taking a stand contrary to the departmental circulars and could not selectively proceed with prosecution in disregard of the monetary limit fixed by Ex.D6, as doing so would amount to impermissible discrimination. The High Court, after considering the circulars and the final quantification of duty (as reflected in Ex.D8), held that the benefit of the enhanced monetary limit was squarely applicable and that reliance on the circulars by the Sessions Judge was neither improper nor unsupported by the record. [Paras 7, 8, 11, 13]

Prosecution could not be lawfully continued; the departmental guidelines and enhanced monetary limit applied and barred prosecution in the facts of the case.

Effect of CENVAT credit on quantification of duty demand for prosecution threshold - presumption of innocence and evidentiary weight of an acquittal - Whether the CESTAT order (Ex.D8) and the allowance of CENVAT credit altered the amount payable such that the monetary threshold for prosecution was not met, and the consequent effect on the accused's acquittal - HELD THAT: - The Special Public Prosecutor contended that the CESTAT did not reduce the demand but only permitted adjustment by way of CENVAT credit, leaving the substantive demand intact. The Sessions Judge, however, relied on the CESTAT order's computation which, after permitting CENVAT adjustment, resulted in a net payable amount below the enhanced prosecution threshold (BED Rs.17,74,021 and AED Rs.1,98,848 totaling Rs.19,72,869). The High Court accepted that permitting CENVAT credit effectively reduced the amount the accused would be required to pay and that the enhanced monetary limit operated prospectively to benefit the accused. The Court also noted the Supreme Court principle that an acquittal amplifies the presumption of innocence and that such protections weigh in favour of upholding an acquittal when the record supports it. [Paras 10, 11, 12, 13]

The CESTAT order, read with allowance of CENVAT credit, produced a net payable amount below the applicable monetary threshold; the acquittal was accordingly upheld.

Final Conclusion: The appeal is dismissed; the Sessions Judge's reliance on the departmental circulars and the CESTAT computation (resulting in a payable amount below the enhanced prosecution threshold) is upheld and the acquittal stands.

Manufacture - prefabricated buildings - excisability - classification - cum-duty price - Cenvat credit - extended period of limitation - remand for fresh adjudication

Manufacture - prefabricated buildings - excisability - remand for fresh adjudication - Whether the activities carried out by the appellant amounted to manufacture of prefabricated buildings (green houses) and thereby attracted central excise duty for the periods in dispute - HELD THAT: - The Tribunal examined the factual matrix and the authorities' findings and concluded that the core question-whether the appellant's cutting, bending, drilling, supply and on-site assembly resulted in a manufactured, marketable pre-fabricated building (green house) rather than mere trading or provision of erection services-remained a question of fact unresolved on the record. The Tribunal noted that the earlier decision in Jain Irrigation addressed classification and incidental reliefs (cum-duty price, Cenvat credit and limitation) but did not determine the manufacture issue there and thus is not conclusive on the factual question in this case. Documentary material, statements of the managing director and inconsistent adjudicatory findings left open whether the appellants merely supplied components or supplied ready-to-assemble sets which acquire a distinct identity prior to fixation at site. Given these factual uncertainties and the absence of clear findings on whether service-taxed erection/commissioning overlapped with alleged manufacture, the Tribunal held that the matter should be remitted to the original adjudicating authority for fresh consideration of the manufacture/excisability question on the materials on record and after affording the appellant an opportunity of hearing. [Paras 4]

Matter remanded to the original authority for de novo adjudication on whether the activities constitute manufacture of green houses for the periods in dispute; fresh decision to be taken after hearing the parties.

Classification - cum-duty price - Cenvat credit - extended period of limitation - Application of ancillary reliefs (classification consequences recognised in Jain Irrigation) was noted but not finally applied pending remand on manufacture; related issues of cum-duty price, Cenvat credit and limitation require fresh adjudication if manufacture is upheld - HELD THAT: - The Tribunal recorded that the tribunal decision in Jain Irrigation upheld classification of certain supplies as ready-to-assemble green houses and awarded cum-duty price benefit, entitlement to Cenvat credit (subject to verification) and restricted revenue to normal limitation. However, because the present case contains unresolved factual questions on manufacture and potential overlap with service-taxed erection/commissioning, the Tribunal did not apply those ancillary reliefs conclusively. Instead, it observed that if the original authority concludes on remand that manufacture/excisability is established, issues such as entitlement to Cenvat credit, cum-duty price treatment and applicability of extended limitation will have to be considered and determined by the original authority in accordance with law and on verification of documents. [Paras 4]

Ancillary reliefs (classification consequences, cum-duty price, Cenvat credit, limitation) are to be considered by the original authority in the remand proceedings and are not finally decided by this order.

Final Conclusion: The appeals are allowed by way of remand: the matters are sent back to the original adjudicating authority for fresh adjudication on whether the appellants' activities amount to manufacture of prefabricated green houses for the stated periods, and for determination of consequential issues (Cenvat credit, cum-duty price, limitation and penalties) as necessary; adjudication to be completed within three months after hearing the parties.

Open purchase orders as standing offers - agreement to sell versus executed sale - occurrence of inter-State sale under Section 3(a) of the CST Act - movement of goods pursuant to call-off orders and JIT supply model - stock transfers supported by Form-F

Open purchase orders as standing offers - agreement to sell versus executed sale - Open purchase orders issued by the purchasers are standing offers and do not constitute a binding agreement to sell. - HELD THAT: - The Court examined the contractual matrix and the documentary purchase orders which lacked binding quantities and definite delivery dates, and held that such open purchase orders merely created a standing offer. Relying on precedents which distinguish an agreement to sell (an executory contract conferring jus in personam) from a sale (which transfers jus in rem), the Court found that binding contracts arose only upon issuance of specific call-off or purchase orders specifying quantity and delivery. The factual practice of maintaining stock at regional depots to meet just-in-time requirements did not convert the standing offer into a concluded sale. Consequently, the open purchase orders, viewed in the light of the authorities cited, did not amount to an agreement to sell. [Paras 35, 37]

Open purchase orders are standing offers and not confirmed agreements to sell.

Occurrence of inter-State sale under Section 3(a) of the CST Act - movement of goods pursuant to call-off orders and JIT supply model - stock transfers supported by Form-F - Inter-state movement of goods to petitioner's depots under Form-F did not constitute inter-State sale under Section 3(a) of the CST Act; such movements were stock transfers and sales (when effected) took place intra-State from the depot on call-off. - HELD THAT: - The Court applied the statutory test in Section 3(a) which requires that the sale or purchase occasion the movement of goods from one State to another. Finding that title and ownership remained with the assessee while goods were warehoused in depots outside the State and that the executed sales occurred only when specific purchase orders were released and goods were delivered from the local depot, the Court concluded that the prior transfer to depots were stock transfers covered by Form-F. The Court relied on authorities holding that where neither quantity nor specific delivery obligations are fixed and supply is by way of standing offer, mere movement of goods to branches does not create a completed inter-State sale. Applying these principles to the facts, the Court held movement to depots did not amount to inter-State sale under Section 3(a). [Paras 36, 37]

Movements to depots under Form-F were mere stock transfers; inter-State sale under Section 3(a) did not arise.

Final Conclusion: Writ petition allowed; impugned order dated 27.06.2019 quashed, holding that the open purchase orders were standing offers and the inter-State movements to depots were stock transfers rather than inter-State sales.

Condonation of delay - exclusion of the Limitation Act by the scheme of a special statute - review under statutory provision - power to condone delay under special statute - discovery of new or important facts - maintainability of review - clarificatory power - application of the scheme of the KVAT Act

Condonation of delay - exclusion of the Limitation Act by the scheme of a special statute - power to condone delay under special statute - application of the scheme of the KVAT Act - Whether delay in filing the review under Section 62(8) of the KVAT Act could be condoned. - HELD THAT: - The court examined the statutory scheme of the KVAT Act in light of precedents which consider whether the Limitation Act applies where a special statute prescribes time-limits. It distinguished the factual matrix of Dehar Power House Circle and found that Hongo India (P) Ltd. controls where the special law's scheme demonstrates that the legislature intended exclusion of condonation unless expressly provided. Chapter VI of the KVAT Act permits condonation for appeals and revisions where shorter periods (30, 60, 90 days) are prescribed by express provisos, but the review provisions under sub-section (8) of Sections 60 and 62 and sub-section (9) of Section 63 grant a longer period of one year without any proviso permitting condonation. On that basis, the court held that the scheme excludes the Limitation Act for review applications under Section 62(8) and therefore delay could not be condoned in the present petition. [Paras 7]

Delay in filing the review under Section 62(8) of the KVAT Act cannot be condoned; the application for condonation is rejected.

Review under statutory provision - discovery of new or important facts - maintainability of review - clarificatory power - Whether the review is maintainable on merits as a statutory review under the KVAT Act. - HELD THAT: - On merits the assessee sought clarification that stock transferred from its Kerala manufacturing unit to a godown in Tamil Nadu constituted exports entitling input tax credit. The court recorded that the assessee failed to establish an export order antecedent to the stock transfer and did not produce documents proving that the taxable purchases were made pursuant to an export order. The statutory ground permitting review is limited to discovery of new or important facts which, despite due diligence, were not available earlier. No such discovery was shown; the petition amounted to an attempt to re-hear the matter or obtain a blanket clarificatory order without examination of transaction-wise evidence. Applying the statutory test and the reasoning in Ajit Kumar Rath, the court found the statutory grounds for review absent. [Paras 8, 9, 10]

The review is not maintainable on merits for lack of discovery of new or important facts and for absence of documentary proof; the review petition is rejected on merits.

Final Conclusion: The review petition is dismissed: delay in filing cannot be condoned under Section 62(8) of the KVAT Act, and on merits the petition does not satisfy the statutory grounds for review (no discovery of new or important facts and lack of documentary proof), hence the review is rejected.

Rate of tax as declared by the Supreme Court - legality of revenue recovery demand exceeding declared rate - binding precedent under Article 141 of the Constitution - enforceability of orders throughout India under Article 142 - invocation of writ jurisdiction under Article 226 despite exhaustion of statutory remedies - distinction between non-entitlement to refund and prohibition on fresh collection

Rate of tax as declared by the Supreme Court - binding precedent under Article 141 of the Constitution - The Supreme Court's declaration that the goods are taxable at 4%/5% is binding and forms the law of the land. - HELD THAT: - The High Court applied Article 141 to hold that the Supreme Court's decision in MP Agencies, declaring Ujala Supreme and Ujala Stiff & Shine taxable at 4%/5%, is binding on all courts and parties. The Court observed that Article 142 reinforces the enforceability of the Supreme Court's orders throughout India. Consequently, the legal position that the correct rate is 4%/5% governs assessment and recovery proceedings concerning the goods in question. [Paras 10, 11, 12]

The Supreme Court's ruling that the applicable rate is 4%/5% is binding and controls the present dispute.

Legality of revenue recovery demand exceeding declared rate - distinction between non-entitlement to refund and prohibition on fresh collection - Revenue recovery notices demanding tax in excess of the 4%/5% rate are illegal and unenforceable. - HELD THAT: - The Court examined the assessment order and subsequent revenue recovery notices and found that what the respondents sought to recover by Exts.P3 and P4 was the differential tax over and above the 4%/5% rate (with penal interest). Noting that the petitioner had paid the admitted 4% and that the Supreme Court had held excess payments would not be refunded, the High Court held that such a non-entitlement to refund does not authorize the Department to collect the differential tax from assessees who had been charged a higher rate. Therefore, recovery notices that demand amounts beyond the Supreme Court-declared rate lack authority of law and must be set aside. [Paras 12, 13]

Exts.P3 and P4 revenue recovery notices demanding tax in excess of 4%/5% are illegal and unenforceable and are set aside.

Invocation of writ jurisdiction under Article 226 despite exhaustion of statutory remedies - It is permissible to invoke writ jurisdiction under Article 226 even after statutory remedies have been exhausted where continuation of the challenged action vitiates the law declared by the Supreme Court. - HELD THAT: - The Court observed that notwithstanding dismissal of statutory appeals and revision, the petitioner could invoke the High Court's constitutional jurisdiction because the recovery proceedings sought to enforce a position contrary to the law as declared by the Supreme Court. The power under Article 226 is an available remedy when enforcement of an earlier order would contravene the law laid down by the apex court. [Paras 14]

Invocation of Article 226 was lawful and the writ petition could be entertained to set aside recovery proceedings inconsistent with the Supreme Court's decision.

Remand for verification of payment of admitted tax - Respondents may raise a fresh demand only if it is found that the petitioner has not paid tax at the rate of 4%/5% for the relevant period. - HELD THAT: - While setting aside the existing revenue recovery notices for demanding excess tax, the Court permitted the respondents liberty to verify compliance and, if necessary, raise a fresh demand limited to amounts legitimately due at the 4%/5% rate. This preserves the Department's power to collect any legitimately unpaid tax at the correct rate but confines further action to verification and fresh assessment if non-payment of the correct rate is established. [Paras 15]

Respondents are at liberty to raise fresh demand only after verification that the petitioner has not paid tax at the rate of 4%/5% for the relevant year.

Final Conclusion: Writ petition allowed: Exts.P3 and P4 revenue recovery notices demanding tax in excess of the Supreme Court declared rate of 4%/5% are set aside; petitioner to produce certified copy of this judgment before respondents; respondents may, after verification that tax at 4%/5% was not paid for 2011 12, raise fresh demand confined to the legally due amount.

Quashing of criminal proceedings - Liability of company directors under Section 141 of the Negotiable Instruments Act - Requirement of specific averments to show a person was "in charge and responsible" for company affairs - Effect of prior resignation from directorship on criminal liability - Application of the dictum in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla

Liability of company directors under Section 141 of the Negotiable Instruments Act - Requirement of specific averments to show a person was "in charge and responsible" for company affairs - Effect of prior resignation from directorship on criminal liability - Quashing of criminal proceedings - Whether the complaint in C.C.No.3645 of 2015 against the petitioner/Accused No.3 is liable to be quashed for lack of specific averments showing he was in charge and responsible for the conduct of the company's business on the date of the offence and in view of his prior resignation as director. - HELD THAT: - The court examined the complaint and found only bald averments referring to the petitioner as a director (paras. 5 and 8) and no specific allegations that he signed the cheque, negotiated the credit facility, or was in charge of the company's business when the liability arose. The admitted chronology shows the petitioner resigned as director on 24.01.2012 (documentary printout from Ministry of Corporate Affairs) while the Letter of Credit facility was availed on 26.12.2014 and the impugned cheque was issued in 2015. Applying the legal principle in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla-that mere status as a director does not automatically attract vigorous liability under Section 141 and that the complaint must aver that the director was in charge and responsible for the conduct of business-the court held the requirements to fasten liability on the petitioner were not satisfied. The court distinguished prior quash petitions of co-accused insofar as those proceeded on different factual pleas (e.g., cheque given as security) and therefore would not govern the petitioner's case. Having found absence of the requisite averments and that the petitioner's resignation pre-dated the alleged offence, the court concluded that continuation of proceedings against him was not maintainable and quashing was appropriate (para 5). The court additionally directed expedition of the remaining trial between other accused and set a timeline for conclusion (para 6). [Paras 5, 6, 7]

Proceedings in C.C.No.3645 of 2015 against the petitioner/Accused No.3 are quashed for failure of the complaint to aver that he was in charge and responsible for the company's conduct at the time of the offence, coupled with his prior resignation; trial court directed to proceed expeditiously in respect of other accused.

Final Conclusion: The Criminal Original Petition is allowed; the proceedings in C.C.No.3645 of 2015 against the petitioner/Accused No.3 are quashed for lack of specific averments attributing responsibility to him at the time of the offence and in view of his prior resignation as director; the trial court is directed to proceed expeditiously in respect of the remaining accused.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - criminal liability under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 - liability of directors/erstwhile management during corporate insolvency resolution process - maintainability of prosecution against persons in charge of the corporate debtor despite appointment of Interim Resolution Professional

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - criminal liability under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 - Whether the moratorium under the I&B Code bars initiation or continuation of criminal proceedings under Section 138/141 of the Negotiable Instruments Act against persons other than the corporate debtor, including the Managing Director. - HELD THAT: - The Court relied on the decisions of the Supreme Court, including P. Mohanraj, and other precedents to hold that the statutory moratorium under Section 14 of the I&B Code applies to the corporate debtor only and does not extend to natural persons who are statutorily liable under Chapter XVII of the Negotiable Instruments Act. Proceedings under Section 138/141 insofar as they relate to the corporate debtor are covered by the moratorium, but criminal prosecution can be initiated or continued against persons named in Section 141(1) and (2), including directors or persons in charge of the corporate debtor. Applying this principle, the petitioner's main contention that the moratorium precludes prosecution against him as Managing Director was negatived. [Paras 11, 12, 13]

Moratorium under Section 14 IBC does not bar criminal proceedings under Section 138/141 NI Act against directors or persons in charge of the corporate debtor; the complaint against the petitioner in his personal capacity is maintainable.

Maintainability of prosecution against persons in charge of the corporate debtor despite appointment of Interim Resolution Professional - inadmissibility of deciding disputed facts at the quash petition stage - Whether, having regard to the appointment of an Interim Resolution Professional and the petitioner's plea that he was not in charge or did not sign the cheque, the criminal complaint against the petitioner ought to be quashed at the stage of this petition. - HELD THAT: - The Court noted that the IRP had been appointed on 04.09.2017 and that the disputed cheque was dated 29.12.2017, but observed that disputed factual questions (including whether the petitioner signed the cheque or was in charge of the company) could not be resolved in a petition under Section 482 of Cr.P.C. The petitioner's reliance on IRP appointment does not preclude the complaint against him personally where Section 141 personal liability is alleged. The Court further observed that the reply/notice on record contains assertions that the cheque was issued by the Managing Director and that the matter involves contested facts which must be gone into at trial. Accordingly, there was no merit for interference at the quash stage. [Paras 15, 16, 17, 18, 19]

Petition to quash the criminal complaint against the petitioner is dismissed; disputed factual issues must be adjudicated at trial and the prosecution may proceed against the petitioner in his personal capacity.

Final Conclusion: Criminal Original Petition dismissed. The court held that the IBC moratorium does not bar prosecution under Section 138/141 of the Negotiable Instruments Act against directors/persons in charge; disputed factual contentions regarding the petitioner's role and signature cannot be decided on a quash petition and must be examined at trial.